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The Markets May Be Starting To Worry About Rates 02-19-21

Summary:
From a portfolio management perspective, we have started to raise cash and reduce our equity risk somewhat. Our bond portfolio now has a very short duration, and high cash levels are acting as an early hedge against volatility. We are not getting overly aggressive on hedging risk just yet as the money flow indicators, as shown above, remain supportive. However, that signal is beginning to get more extended, and the market is starting to show early signs of deterioration. As I stated in the open, sometimes we need to act in advance of the correction. Such is particularly the case when there is excess speculation that can lead to very sharp single-day declines that make it extremely difficult to take appropriate actions amid a “panic-driven” sell-off. Conclusion If you missed this week’s

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From a portfolio management perspective, we have started to raise cash and reduce our equity risk somewhat. Our bond portfolio now has a very short duration, and high cash levels are acting as an early hedge against volatility.

We are not getting overly aggressive on hedging risk just yet as the money flow indicators, as shown above, remain supportive. However, that signal is beginning to get more extended, and the market is starting to show early signs of deterioration.

As I stated in the open, sometimes we need to act in advance of the correction. Such is particularly the case when there is excess speculation that can lead to very sharp single-day declines that make it extremely difficult to take appropriate actions amid a “panic-driven” sell-off.

Conclusion

If you missed this week’s post on Howard Marks on “speculative manias,” it is a good analysis of what we are dealing with currently.

Importantly, it is essential to remember that portfolio management is not about ALWAYS being right. It is about consistently getting “on base” that wins the game. There isn’t a strategy, discipline, or style that will work 100% of the time.

“The biggest investing errors come not from factors that are informational or analytical, but from those that are psychological.” – Howard Marks

The biggest driver of long-term investment returns is the minimization of psychological investment mistakes. As an investor, it is merely your job to step away from your “emotions” for a moment. Look objectively at the market around you. Is it currently dominated by “greed” or “fear?” Your long-term returns will depend not only on how you answer that question but how you manage the inherent risk.

Whether it is Paul Tudor Jones or any other great investor throughout history, they all had one core philosophy in common; the management of investing’s inherent risk.

As many of those found out during the Gamestop saga:

“If you run out of chips, you are out of the game.”

The Markets May Be Starting To Worry About Rates 02-19-21


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The Markets May Be Starting To Worry About Rates 02-19-21

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By Lance Roberts, CIO


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The Markets May Be Starting To Worry About Rates 02-19-21


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The Markets May Be Starting To Worry About Rates 02-19-21


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The Markets May Be Starting To Worry About Rates 02-19-21


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The Markets May Be Starting To Worry About Rates 02-19-21

Lance Roberts
Lance Roberts has sharpened that lens with 30 years in the investing world from private banking and investment management to private and venture capital. Lance Roberts’ perspective and common sense analysis is sought after by media outlets such as Fox 26 News in Houston, CNBC, CNN and Fox Business News along with numerous publications including the Wall Street Journal, USA Today, Reuters and the Washington Post. Roberts is the Editor of the X-Factor report and publishes the blog Daily X-change.

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